New York Fed President urges tight control of inflation expectations

New York Federal Reserve (Fed) President John Williams is urging his colleagues to take decisive action in response to inflation deviating from the central bank's targets. He argues that global financial regulators should now focus less on finding a perfect solution to the current dilemma and more on minimizing impulsive policy responses and the serious mistakes that often follow.

One such mistake, according to Williams, could be allowing inflation expectations to drift from target levels. Sudden shocks are often the cause of these dynamics. However, such shocks do not usually lead to a long-term shift in inflation. But in the absence of strict regulatory measures, the trend may become permanent.

The New York Fed chief emphasizes that officials cannot always predict how consumers will react to crises. In recent years, global economic uncertainty has surged due to the COVID-19 pandemic, geopolitical tensions, and trade disruptions. This makes monitoring both short- and long-term inflation expectations critical. Consumers must remain confident that price growth will stabilize, Williams says.